U.S. state and local-government pensions ended the 2012 fiscal year with a median gain of 1.15 percent as the European debt crisis and a slowing global economy damped stock returns, Wilshire Associates said.

It was a reversal after two years of gains for the retirement funds, which have $2.8 trillion in assets, according to the U.S. Census Bureau. The performance, included in a report Wilshire is set to release today, may add to political pressure on public workers to accept benefit cuts and increase contributions to the plans.

This news will provide ample ammunition to those who want to privatize public employee pensions. Those who want to turn our defined benefit system into something akin to a 401K.

But the story is smoke.

The law requires that the public pension systems report out their return on investments as of June 30th, the end of the fiscal year.

If TRS reported their return on investments as of September 30th, just three months later, the reported return would have been 16.4%.

Over the past year TRS reports that its strongest gains from its investments in real estate, which returned +9.91 percent. Positive returns were also recorded from the System’s investments in bonds (+5.68 percent), private equity (+3.76 percent), hedge funds (+2.62 percent), real return securities (+2.54 percent) and stock held in United States companies (+0.96 percent).

But TRS investments in international stocks recorded a negative 11.71 percent rate of return.

All this is to say that any attempt to claim that there is an investment return crisis doesn’t hold up to scrutiny. When considering the success on investment, you never look at just one point in one year. Instead you have to look a multi-year trends.

The failure of the state to meet its pension obligations over the past 50 years resulting in an $85 billion unfunded liability has meant that no matter how well TRS investments do, we are losing money.

That’s because we don’t have 60% of our funds being invested at all.

For that you can thank the Illinois state legislature, not investments.

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“This news will provide ample ammunition to those who want to privatize public employee pensions. Those who want to turn our defined benefit system into something akin to a 401K.”

Why so everyone can lose out? there’s that thing out there called “if we don’t have it than neither should you,” instead of we should have some kind of protection too. In addition, if the state isn’t contributing it’s share doesn’t that blow the whole “my taxes are funding your bloated pension” theory? Fred many people have no idea that so many states don’t participate in social security, and when they hear that the whole tone of the argument changes.

HARRISBURG, PA – The Public School Employees Retirement System (PSERS) today
announced the Fund’s investment performance for the fiscal year ended June 30, 2012.
PSERS posted positive returns of 3.43 percent for the fiscal year, 12.57 percent for the 3
year, 7.19 percent for the 10 year, and 8.42 percent for the 25 year periods ended June 30,
2012. PSERS outperformed more than 85 percent of the public pension plans in the Wilshire
Compass All Public Funds Universe and added nearly $1.1 billion in net investment income to the Fund.

“Over the past few years PSERS’ Board and investment staff made significant changes to
the Fund’s investment asset allocation, including further refining the Fund’s investment
strategy and increasing the diversification of the Fund’s assets,” Van Noord said. “In particular,
PSERS lowered its long‐term actuarial investment rate of return assumption from 8.00 percent
to 7.50 percent and actively reduced its risk profile by significantly reducing its equity exposureand by moving portions of the Fund’s assets into asset classes that are less correlated to the equity markets.”

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